“The 2012 agreement with Hana, which guaranteed KEB’s managerial independence for the following five years, basically embodies our hopes to secure KEB’s identity and competency. Breaking that promise means breaking the trust of the union and management,” Kim recently told The Korea Herald.

Kim Bo-heon. ( Ahn Hoon/The Korea Herald)

Earlier this month, Hana and KEB executives began talks to consolidate the two banking units ahead of the scheduled 2017 merger, which the union officials said is a clear violation of the pact they made two years ago.

Hana Financial acquired KEB from Lone Star Funds in 2012, but had to delay the purchase due to the union’s fierce opposition.

“We believe that Hana chairman Kim Jung-tae is pushing ahead with the plan because he is hoping to get reappointed next March,” the union spokesman said.

The Hana chairman first brought up the issue on July 3, claiming that staging the integration earlier than planned would benefit all sides, while trying to convince KEB employees that such a move would be a “bonanza.”

He added that the two banks would be able to maximize synergy through the merger by saving costs worth some 269 billion won ($262 million) and reaping about 43 billion won in profit annually.

KEB executives have also tried to ease the tension surrounding the early merger plan by highlighting its benefits through a comparison before and after it was acquired by Hana.

KEB posted a net profit of 1.6 trillion won at the time of the acquisition, while Hana recorded 1.2 trillion won.

However, the KEB union argued that Hana neglected to reveal the real costs, which would be “astronomical,” in the initial stage of the merger.

“It’s going to cost hundreds of billions of won every year to integrate the two firms’ computer systems and other services. I don’t understand how that is worth the investment at the current stage if Hana really believed that it was facing a crisis,” Kim said.

The KEB union believed the crisis, if there was one, resulted from Hana’s acquisition of KEB in 2011, and not from the delayed merger.

“Ever since Hana and KEB were placed under the same roof, the amount of money KEB has lost and is expected lose to Hana would exceed 2 trillion won,” the union spokesman said.

“Trust was the key to this merger. But Hana gave that up. It should have gained credibility by persuading KEB employees to find the best solution for the two banks to grow together.”